A risk management system has been previously described whereby an e-commerce participant can have relevant sales information, such as requested purchase price, current bid, highest bid, etc. displayed in the currency local to that e-commerce participant. It has also been provided that the information displayed is formulated using a base currency, and an exchange price relative to that base currency. It will be known by those in the art that should either the base currency or the exchange price fluctuate, then the price information displayed in local currency to the e-commerce participant will also fluctuate. If the price information is displayed in real time, such fluctuations could cause the displayed information to change often, possibly continually. Such a display is not conducive to completing business transactions. Frequent fluctuation in the price displays may be disconcerting for the e-commerce participant, and may make it difficult for the e-commerce participant to determine which of the various options is the most favorable. Thus, it is desirable to have a risk management system that eliminates at least a portion of the price fluctuations.
International e-commerce is forecasted to substantially increase in the immediate future. It is possible that e-commerce will account for almost 10% of global sales of goods and services within the next several years. Business to business (B2B) transactions will most likely constitute the majority of that figure. One important benefit of B2B e-commerce is the degree to which it expands a company""s xe2x80x9cpotentialxe2x80x9d client base to markets across the globe. Consequently, international or global e-commerce may ultimately account for a majority of e-commerce transactions.
In the evolving e-commerce market, few transaction mediums have considered the large currency transactions associated with this new form of international trade, let alone ways of hedging the foreign exchange (FX) risk associated with such transactions. As B2B commerce evolves over the next several years, both regional e-business communities and existing cross-border B2B players will capitalize on the opportunity to dramatically increase their client base and revenues by expanding into global markets. While issues such as security, trade management, and taxation have been addressed by B2B players as they begin their international initiatives, foreign exchange has largely been ignored. This is despite the fact that FX market volatility can markedly change the price of goods sold on the internet, alter the terms of trade agreements, and even be the determining factor as to whether a transaction occurs between two parties.
Increased use of the Internet and other dispersed computer communications networks by commerce participants has also resulted in an increase in the number of transaction facilitators operating on such networks. Transaction facilitators can assist commerce participants in finding and negotiating with other commerce participants such that transactions can be completed. Transaction facilitators can take many forms, such as an internet portal, or even a traditional brick and mortar establishment.
Generally, the transaction facilitator provides a medium through which a purchaser or a seller can make its goods and services known to a potential seller and purchaser, respectively. For example, a facilitator may be a website where a seller posts information regarding their product, including price information. Interested purchasers may then visit the website and view the product and sales information for multiple sellers. From this information, the purchaser may complete the transaction with the seller which has the most favorable terms. It is known that the converse situation can similarly occur whereby the purchaser posts information related to the product sought and terms of purchase, and potential seller""s review the bid information to select the transaction with the most favorable terms. An example of such a portal is EBay(copyright), whereby potential buyers and sellers post information on the Ebay(copyright) website, and the commerce participants are able to determine which option is the most desirable. Another example would include a business to business (B2B) online exchange. An e-commerce transaction facilitator provides a marketplace where a potential purchaser and a potential seller can negotiate and consummate an e-commerce transaction.
It is known for a transaction facilitator to obtain payment from one of the commerce participants each time a transaction is completed. Therefore, it is beneficial to the transaction facilitator to complete as many transactions as possible. Thus, transaction facilitators want to provide the commerce participants with all the information they need to complete the transaction.
Pricing and other financial information can be a key factor in the completion of a transaction. It is beneficial for the transaction facilitator to be able to provide price and other information to each of the commerce participants. In particular, it is beneficial for the transaction facilitator to provide price and other financial information to the commerce participants in a currency local to the commerce participants. As disclosed in another embodiment of this invention, such information can then be displayed either individually or collectively, such that the commerce participant can select the most beneficial transaction.
Providing pricing information in the local currency of the commerce participants can be difficult if the commerce participants engage in commerce using different currency. For example, if the seller engages in commerce in a first currency, the purchaser in a second currency, and the transaction facilitator in a third currency, the transaction facilitator must be able to provide the relevant information in all three currencies. It will be appreciated that given the number of currencies used in the global economy, most transaction facilitators are ill-equipped to provide such financial information and services.
Business to customer (B2C) and B2B commerce, including regional e-business communities and existing cross-border players will capitalize on the opportunity to dramatically increase their client base and revenues by expanding into global markets. While issues such as security, trade management, and taxation have been addressed by e-commerce players in their international initiatives, foreign exchange has largely not been satisfactorily addressed. FX market volatility can markedly change the price of goods sold on the internet, alter the terms of trade agreements, and even be the determining factor in whether a transaction occurs between two parties. E-commerce sites interacting internationally would benefit by transparently embedding the inherent foreign exchange conversion into all their commercial transactions. What is needed is a Foreign Exchange (FX) pricing platform which will enable sites to show prices to each participant in the participant""s local currency. When a transaction is executed, the necessary foreign exchange trade should automatically be conducted so that both a purchaser and a seller transact in their own local currencies.
It would be beneficial to have a risk management system which can provide price and other financial information in the local currencies for each of the purchaser, seller and transaction facilitator. In particular, the risk management system should be able to perform risk management services when a first commerce participant uses a first currency, a second commerce participant uses a second currency, and a transaction facilitator uses a third currency. It would further be beneficial to provide a system whereby the commerce participants and the transaction facilitator can view the financial information in a currency local to one or more of the other participants in the transaction.
Accordingly, the present invention contemplates a risk management system for facilitating an e-commerce transaction wherein the participants to the transaction engage in commerce using different currencies. In particular, the invention contemplates three parties to the transaction, a purchaser, a seller and a transaction facilitator. The transaction facilitator may be a web portal, a brick and mortar establishment, or any other commerce participant whose role in the transaction is to bring the purchaser and seller together such that they may complete a transaction. The present embodiment of the risk management system enables a purchaser, seller and transaction facilitator to share and exchange financial information related to a transaction, where each participant conducts commerce in distinct currencies. The risk management system interacts with the transaction facilitator to provide the necessary currency conversion.
The present invention can also be configured to limit risk associated with fluctuations in a currency price offered by a currency exchange institution to an e-commerce participant. Fluctuations in currency price can be caused, for example, by fluctuations in the market or spot price of the currency. The currency exchange institution can limit risk associated with such fluctuation by setting the currency price at a specified rate and adjusting the specified rate if delta between the market price and the specified rate exceeds a predetermined threshold. The currency exchange institution can then monitor the market price of the relevant currency, and if market price exceeds a certain tolerance that is either above or below the specified rate, the currency price can be re-negotiated. Re-negotiation of the currency price may take place in any means set forth by the parties, for example in face-to-face discussions, by telephone, by email, or automatically by a computer according to agreed upon terms.
Functions associated with tolerance initiated price negotiation including the monetary conversions, periodic monitoring of spot price, comparison with set parameters, and adjustment of the set currency price can be performed by a currency exchange risk management system. Additionally, the currency exchange institution can monitor the spot price continuously or at various time intervals and either alert interested parties when the tolerance is exceeded, or automatically adjust the specified rate according to a predetermined algorithm. The present invention thereby accounts for fluctuations in the market price of the relevant currency and provides stability for the currency price within a given range.
Online risk management can provide distinct advantages in terms of pricing, marketing, site use, and expansion overseas. For example, B2B players can view and make prices in their local currency thereby fostering xe2x80x9cuser friendlinessxe2x80x9d and promoting international expansion which in turn can increase a potential client base and transactional volume. The current invention can also provide foreign exchange transparency and competitive pricing. B2B players can have the ability to hedge foreign exchange risk immediately, thereby reducing a risk associated with related volatility.
The present invention provides a method and system to implement risk management of foreign exchange of currency related to an online transaction. The present invention can determine an exchange price and a tolerance parameter for a foreign currency as the foreign currency relates to a base currency. A computer system can receive a spot price relating to a market price for exchange of a foreign currency and compare the spot price with the tolerance parameter. The system can modify the exchange price if spot price exceeds the tolerance parameter. In addition, the system can receive information including the base currency amount involved in an online transaction and transmit the base currency amount and the foreign currency amount, wherein the foreign currency amount is derived according to the exchange price.
In one embodiment, the present invention can determine a first tolerance parameter and a second tolerance parameter, wherein a rise in the spot price is compared to the first tolerance parameter and a fall in the spot price is compared to the second tolerance parameter. In addition, the magnitude of the first tolerance parameter is not equal to the magnitude of the second tolerance parameter. If desired, only a rise in the spot price can be compared to the tolerance parameter such that the exchange price is modified if the spot price is higher than the tolerance parameter. Similarly, only a fall of the spot price can be compared to the tolerance parameter such that the exchange price is modified if the spot price is lower than the tolerance parameter.
In one aspect, a spot price can be determined and compared to the tolerance level at predetermined periods of time. Additionally an original tolerance level can be modified to create a new tolerance level, if the spot price exceeds the original tolerance level.
In another aspect, the present invention can include a computer system for providing risk management relating to online transactions. A computer server can be made accessible with a network access device via a communications network; and executable software can be stored on the server and be made executable on demand via the network access device. Software operative with the server to can be utilized to determine an exchange price for a foreign currency as the foreign currency relates to a base currency and determine a tolerance parameter for the foreign currency price as the foreign currency relates to a base currency. The system can receive a spot price relating to a market price for exchange of the foreign currency and compare the spot price with the tolerance parameter. The exchange price can be modified if the spot price exceeds the tolerance parameter.
The software can calculate a modified exchange price if the spot price exceeds the tolerance parameter. In addition, the system can be operative to display the foreign currency price and a corresponding base currency price.
Other embodiments can include a computer executable program code residing on a computer-readable medium or a computer data signal embodied in a digital data stream.